Most people opt to buy an existing home when they’re in the market for a new home. But a growing number of people are deciding to build a home instead. With new construction popping up all over the country, you might be considering building your own dream home, too. Before you do, make sure you familiarize yourself with new construction home loans.

Obtaining new construction home loans to build a house is a different process than what is required when you apply for a mortgage for an existing home. A mortgage to build a house is considered much riskier to the lender because there is no finished home to serve as collateral in case the borrower falls behind on the loan. As a result, it can be difficult to qualify.

Most lenders will also require a substantial down payment, contractor bids, and a detailed construction site map and timetable before approving a construction loan. Once you’re approved, the hardest part is over.

Instead of providing the entire amount once construction starts, lenders disburse payments throughout the project at various stages of completion, such as pouring the foundation or framing the home.

Once the construction is complete, the contractors are paid and the homeowner begins making regular mortgage payments.

One of the best types of new construction home loans is a construction to permanent loan. Here, the borrower pays only interest payments until the home Is finished. At that point, the construction loan is rolled over into a permanent loan, so the borrower only has to pay one set of closing costs.

If you want to build a home, a construction to permanent loan will help the process go by smoothly and affordably because it makes it so that you only have to obtain one loan for both the construction of your new home and the mortgage for your home once the home is complete. 

In most cases, these loans only have one closing as well. This minimizes your time investment and makes it simpler for you to take care of the entire financing process in one transaction.

 

 

If you are considering having a home built so that you can truly find your dream home, contact a Nations Lending Personal Mortgage Advisor today toll-free at 877-816-1220 for a home financing consultation. They will take the time necessary to discuss your options and inform you of the process to purchase a newly constructed home.